Money Minute – September 7 2017 Economy Picking Up

Economy Picking Up

For things first, the Australian economy is showing clear signs of picking up and that’s good news.

Economic growth in the June Quarter, 0.8 per cent.

It’s now been 27 years, we’re now at 27 years, of continued economic growth since a recession.

In the September quarter last year, remember the economy was going backwards.

Annual growth though, 1.8 per cent. And although that is technically slow, it’s certainly improving. And that is exactly what the Government and the Reserve Bank are predicting.

But what’s causing the pick up? Well – there are tentative signs that Businesses are starting to improve.

And when that happens, you normally expect employment to pick up, and wages as well.

Now don’t get too far ahead of yourself though. The signs of recovery are very tentative.

In the meantime,. One of the biggest drivers of growth is the government – state and federal – in new infrastructure developments. And that is the way governments are supposed to work.

When the private sector stops spending, the government steps up – and in this case takes advantage of low interest rates to build infrastructure and to create jobs.

There’s also something else behind that pick-up and that’s You. But there is two ways to interpret that…

The household savings ration – you can see it here – it’s falling sharply.

In other words, households are still saving, but it’s at a much slower rate. Now you could argue this is positive as families are more confident to spend money and buy a new tele or to renovate the house…and that could be a part of this story.

But the other way to look at it, with nearly year-on record low wages growth, Aussie families are struggling – especially with rising costs they can’t afford, like energy, health insurance, kids’ education.

Families with these pressures and flat incomes…common sense tells you are less likely to save money and that squeeze is not good for the economy…cause you want families to have rising incomes, paying more tax and to be confident to spend.

So interpret this the way you like…

Markets

The way to market interpret was to push the Dollar back below 80 US cents. The Dow Jones Index overnight jumped by 54 points.

About The Author

Ross Greenwood is the Nine Network’s business and finance editor, and hosts Sydney's top-rating radio program, Money News, for 2GB, 4BC. 3AW and all networked stations across the Macquarie Media group.
He appears daily on the Today Show - notably for his Money Minute - and Nine News.